Reed Elsevier rises as FTSE 100 drifts lower

Publishing and exhibitions group Reed Elsevier rose nearly 6% after a push from analysts at Goldman Sachs.

The bank has added Reed to its conviction buy list after a prolonged period of underperformance by the company's shares. The bank said:

"Reed has been the worst performing stock in our coverage over the last month, falling 9% in absolute terms, underperforming the sector by 13% and the European market by 22%. Reed has been hit by concerns over negative indications on exhibitions, advertising deterioration at Reed Business International and potential loss of market share at legal, as well as risks over reinvestment by the new chief executive. However, we believe underlying exhibitions should prove reasonably resilient, that ad declines are already discounted and that legal should continue to perform solidly. Further, we see limited need for significant reinvestment at this stage. As such, the annual meeting trading statement on April 21 should reassure, as should competitor results before its first half results on July 30."

The recommendation pushed Reed 27p higher to 487.25p, making it the best performer in the leading index.

Overall the market had another directionless day, with the FTSE 100 finally finishing 20.59 points lower at 3968.40. There was little inspiration from Wall Street, following downbeat US economic news - including consumer inflation falling 0.1% and industrial production dropping 1.5% in March - along with a disappointing outlook statement from Intel and comments from Wal-Mart suggesting there would be no quick end to the recession. The Dow Jones Industrial Average was up just 20 points by the time London closed.

Defensive shares were in demand once more, with British American Tobacco 71p better at £15.66 and Imperial Tobacco 52p higher at £14.82. BAT was also helped by Charles Stanley and Investec both issuing buy notes on the business.

Pharmaceutical companies moved higher, with GlaxoSmithKline up 16p to £10.24 and Shire rising 22p to 825p, with vague takeover talk resurfacing.

But investors shied away from the mining sector and the banks. Vedanta Resources closed 76p lower at 932p, Xstrata was down 40p at 573.5p and Rio Tinto lost 129p to £23.71 after its annual general meeting and first quarter figures which showed a drop in aluminium and iron ore output. Mexican silver specialist Fresnillo fell 2.25p to 446.75p, despite a reasonable first quarter production report, as analysts at Cazenove cut their rating from outperform to in-line.

Oil shares reversed earlier gains after a drop in crude prices prompted by news that US stocks rose last week to their highest level for twenty years. BP slid 9p to 429.5p while Royal Dutch Shell fell 8p to £13.90.

As for the banks, they fell back once more after yesterday's Tuesday's gains following better than expected figures from Goldman Sachs. News of a £1.17bn quarterly loss by Swiss bank UBS provided a bit of a reality check. Lloyds Banking Group lost 3.8p to 84.1p, while Royal Bank of Scotland fell 1.5p to 27.7p despite suggestions it was in talks with three banks who might buy its Asian businesses.

Fund management group Schroders lost 59.5p to 812p after a downgrade from Credit Suisse. It said:

"We are reducing our rating on Schroders to underperform (from neutral) and our 2009 earnings per share forecast is around 20% below consensus estimates. Clearly a continued recovery in equity markets may result in retail flows into equities improving especially in Continental Europe where there was been a move into money market funds and cash deposits in recent quarters. However, we are also concerned that Schroders could start to see a greater pace of redemptions in Asia."

Elsewhere, BAE Systems climbed 11.75p to 334.75p as it was awarded a role in a $50bn US government information technology contract. Earlier in the day UBS analysts had said the company could benefit from the supplementary US defence budget. They said:

"We believe BAE is likely to win contract work from the $2.1bn allocated to Humvee vehicles (where it provides up-armouring), $600m for [medium tactical] vehicles and $500m for Bradley armoured vehicles. BAE does not include US defence budget supplemental contracts in its earnings guidance. As such, we would expect contract awards from the US supplemental to be a source of potential upside earnings risk for BAE."

Gases group BG slipped 1p to £10.43 despite announcing a new oil discovery in the Santos basin, offshore Brazil.

Lower down the market, oil and gas explorer Regal Petroleum dropped 2.25p to 50p as it said talks with Australia's Macquarie about a $100m loan had ended and it was exploring other options. Regal said: "Negotiations with other potential lenders and commercial/joint venture partners continue." This prompted a revival of recent talk that TNK-BP could be interested in the company, with Russia's Lukoil another name mentioned.

Finally Durex condom and Scholl footcare group SSL International slipped 0.5p to 450p even though it forecast that full year profits would be 20% ahead of last year. Analysts at FinnCap said:

"SSL's pre-close trading update for year end 31 March 2009 is in-line with expectations. Sales are expected to be around £640m (consensus £638m) and profit growth 'in excess of 30%' (consensus is £76m, +33%). On 16 times consensus forecast earnings per share of 27.4p, SSL doesn't look cheap, but the recent acquisition of a further stake in BLBV [a condom business serving the former Soviet Union countries] should continue growth momentum. Perennial bid speculation and astonishing growth despite global economics (no matter how gloomy, apparently we still buy condoms) should continue to support the premium rating. One to tuck away."